But, What If We Couldn't Borrow Anymore?

Not that it will happen over the next 10 days but I wondered what would happen if the Treasury “really” couldn’t borrow any more money? Magically Zero Hedge put out an article yesterday that illustrates the immediate effects. Between Oct. 18th and Nov. 15th the Treasury has $441 billion worth of bonds to “redeem.” We don’t really redeem them, we simply borrow the same amount of funds due (plus interest?) and magically “rollover” the old debt into new debt…and all is well.

I am sure you recall the 1980 movie aptly named “Rollover” where the financial world stood at the abyss and was at the mercy of whether the Saudis would “rollover” their debt. This is exactly where we are today with a small caveat. The caveat being “this is where we were” last year some 18 months ago wondering if the Chinese would continue to purchase our debt. The answer as it turns out was “no,” they stopped making purchases and actually started to liquidate which has caused interest rates to rise.

This brings us to where we are today. The Federal Reserve is THE only buyer able to purchase what is needed to “sell” by the Treasury to raise new debt AND payoff old debt. This is pure and simply an insolvency of the first degree. Just because “we” pretend that it’s not so makes no difference. Just because the global financial system “pretends” that it’s not so makes no difference either. It is what it is and at some point in time as it always happens, “the crowd” (which even includes Americans) will realize this.

Many of you have heard Jim Sinclair’s “GOTS” (get out of the system). If you cannot do this entirely you absolutely MUST do this to some extent for the simple reason of your own survival. When the day comes that we either cannot “rollover” our debt OR the “masses” understand the Ponzi nature and panic…everything will close. So you have $3 million in muni bonds and are comfortable…”you’re all set?” Really? Will the municipality actually pay? Where will you cash your check? Or even deposit it? The majority has not even thought past the first or second “move” to what is coming.

In the event that the Treasury cannot borrow whether it is because of Congressional/Executive office sabre rattling or because the market itself shuts them down, everything will close. “Everything” in this case means EVERYTHING! If you cannot bring yourself to “get out of the system” and if you are willing to do ONLY one thing to help yourself then I would suggest that you buy some silver. Silver is wealth. It will not evaporate or be bailed in. It most probably will not even be considered for confiscation and most importantly “it will spend.” After some very brief period of time, “dollars” won’t spend…silver will.

Eric Sprott and several others have said that silver will be THE best investment of this decade, I don’t doubt them in any way. In fact I agree with them but that is not why you must own silver. As I said above, owning “some” silver means that you have something “outside” of the system that represents wealth AND will spend. If it turns out to be so, that silver is THE best investment of the decade then you made a good investment. If (when) it turns out that the system shuts down and the banks and brokers “bail in” some of your assets, then you will have something that is spendable at the very moment that it’s needed most.

How long could we see a financial system closure? Your guess is as good as mine. Hopefully not long. Some will say “there he goes again fear mongering.” I would remind everyone that the FDIC (also Canada and Europe) have written laws that provide for “bail ins.” Do you really believe that any law is written “not to be used?” This whole thing has been systematically set up, they know that failure is coming and have (are) prepared for it. Without going over the edge here I will ask you one more question, for what possible reason could there be a need for 2 billion rounds of ammunition? “They” know that it’s coming, so do you if you’re willing to admit it to yourself.

5 Comments

Ciao
on October 10, 2013 at 11:12 am

Bill,

I don’t think 99% know what may happen. So if we do have that great leveler, There is going to be much suffering and pain. It’s hard to believe. We all know who got us into this mess and they are the same who can not get us out.

RF
on October 10, 2013 at 11:49 am

Bill,

It most definately is coming and the fat lady will sing, but with respect to the debt ceiling and October 17th, Congress WILL raise the debt ceiling because if they don’t they will immediately lose their power. If any one thinks they will lose their power on purpose I have some swamp land to sell them.

The debt ceiling will ALWAYS be raised until the whole thing blows up.

Glen
on October 10, 2013 at 1:14 pm

Bill, I agree with what you are saying and so do the markets. With this in mind, what do the Republicans hope to gain from this excersise in futility? Our nation’s reputation is being damaged and our dirty laundry is being aired for the world to see. Now, even less country’s will purchase our Tbonds and more will decide to sell what they have. The whole mess seems counterproductive.

Marco
on October 11, 2013 at 1:05 am

@ Glen this is exactly how failure behaves. In a failure everyone gets to smell and air their dirty laundry. And the government is a complete failure. Don’t think for a minute this was not all planned. As Gerald Celente said, “Politics is show business for ugly people”, and in show business, you better know how to act!

Don Paul
on October 10, 2013 at 9:31 pm

Glen: What is productive? Borrowing more? Going deeper in the hole? The only real productive course would be to look reality squarely in the face and begin living within our means, but that is not going to happen, at least not until reality takes over, and it will. It is not a matter of if; it is a matter of when.

The media is hilarious – by that I mean laughable, but not funny… Last night on the NBC News Broadcast they said, “If the Republicans do not agree to raise the debt limit the United States won’t be able to borrow the money needed to pay its bills.” Hello! Listen to what you’re saying! The analogy has been made many times, but it rings true. Imagine a family in the same boat… Dah! If you have to borrow money to pay your bills you are already finished / you’re bankrupt.

If they taxed the so called. “rich” 100% of their income (which would ruin the economy) they still would not have enough revenue to keep the promises they have made to the American People. They can only keep these promises by borrowing and printing. Game over.

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